by Paramount Global (PARA) shares rose 6% in pre-market trading Friday.
On Thursday, Paramount reported a profit for the first time in its streaming division, while its linear TV business reported a sharper-than-expected slowdown, with the company taking a nearly $6 billion writedown on the value of its cable business.
In a conference call, the company also announced plans to lay off 15% of its U.S. workforce. The layoffs will take place “in the coming weeks and will be substantially completed by the end of the year,” management said.
The results come as Paramount prepares for its expected merger with Skydance Media, which is expected to close in the third quarter of 2025.
In the second quarter, Paramount reported operating income of $26 million for its direct-to-consumer (DTC) segment, an improvement of $450 million from the same period last year. The company reported a loss for the segment of $286 million in the first quarter.
“Our strong second quarter performance demonstrates that we are delivering on our strategic priorities,” co-CEOs George Cheeks, Chris McCarthy and Brian Robbins said in the release.
“We will continue to aggressively execute on our strategic plan, which focuses on transforming streaming to accelerate profitability, streamlining our organization – including at least $500 million in annualized cost savings – and improving the balance sheet by increasing free cash flow and optimizing our asset mix.”
Shares were up about 5% in after-hours trading as investors digested the results. At the time of the report, Paramount shares were down about 30% this year.
Overall, the company reported adjusted earnings of $0.54 per share in the second quarter, higher than the $0.13 expected by analysts polled by Bloomberg and higher than the $0.10 Paramount reported in the same quarter last year.
Revenue was $6.81 billion, below consensus expectations of $7.24 billion and down 11% from $7.62 billion in the same period last year. Linear ad revenue declined double digits in the quarter, down 11% from a year earlier, compared with the 10% decline analysts had expected.
Linear ad revenue rebounded 14% in the first quarter on record Super Bowl ad sales, but the second quarter highlighted the challenges traditional media companies have faced amid an increased trend toward cord-cutting.
Like rival Warner Bros. Discovery, the company recorded a $5.98 billion goodwill impairment charge related to its cable networks.
Paramount Chief Financial Officer Naveen Chopra said the charge comes after the company “evaluated relevant factors that could impact the fair value of our reporting units, including the estimated total market value of the company as indicated by the Skydance transactions and recent indicators in the linear subsidiary market.”
Despite profits in its streaming segment, Paramount+ lost $2.8 million in the quarter, to $68 million, “primarily due to the planned exit of a failed deal in South Korea.” But global average revenue per user, or ARPU, increased 26% year over year in the quarter. That helped boost Paramount+ revenue 46% from a year earlier.
In the six months ending June 30, the streaming division is still operating at a loss of $260 million, but the company reiterated its previous guidance that it remains on track to achieve domestic profitability for Paramount+ in 2025.
During the earnings call, the company said there are opportunities for more strategic partnerships and possible joint ventures between competing streaming platforms to generate greater scale.
Meanwhile, revenue from the film division also saw a double-digit decline, falling 18%, with the company blaming the shortfall on “the timing of releases during the quarter” and tough comparisons to last year’s “Transformers: Awakening of the Beasts.”
Skydance: a recovery on the horizon
Thursday’s results come as the company’s imminent acquisition by Skydance remains on the horizon.
Skydance, which will be valued at $4.75 billion after the all-stock deal closes, said it would inject $6 billion in cash into Paramount, including $1.5 billion directly into its debt-ridden balance sheet.
Skydance CEO David Ellison will become chairman and CEO of the combined company, while former NBCUniversal executive Jeff Shell, who was ousted last year over an “inappropriate relationship” with a female employee, will serve as president.
Last month, the new management team laid out its strategic vision for Paramount. It includes $2 billion in cost cuts, $500 million of which are already underway. Thursday’s layoff announcement highlighted those efforts.
“We love the creative engine of this business. But obviously a lot of the business is in the linear world and we know that business is struggling and declining,” Shell said at the time. “I think a lot of us in the industry know that we have to manage these businesses differently as they decline.”
Alexandra Canal is a senior journalist at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and send her an email at [email protected].
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